Punjab & Haryana High Court Judgments — 2013

The High Court upheld the ITAT's order. It noted that the total demand for assessment years 2004-05 and 2005-06 was approximately ₹45,61,74,194/-, and the petitioner-Trust was directed to deposit only ₹11,40,43,550/- (25% of the total demand). The Court found this direction reasonable, considering the Trust's liquidity of ₹120 crore and the interest of the revenue. The ITAT had balanced the Trust's financial position with the revenue's interest. The Court stated that merely filing an appeal does not automatically entitle a party to a stay, and the ITAT's decision to stay 75% was justified. The judgment in Taneja Developers and Infrastructure Ltd. was deemed not applicable as it did not concern the dispute of whether the assessee was a Charitable Trust. The Court directed the ITAT to decide the petitioner's main appeals within two months. The writ petitions were disposed of in these terms.

The High Court held that the reopening of assessment under Sections 147 and 148 read with Section 282 of the Act was valid. The Tribunal was correct in affirming the validity of reopening and the service of notice under Section 148(1) on the assessee's representative. Regarding the additions on account of octroi, the assessee failed to show actual payment of octroi charges, making the AO's addition of Rs. 5,000/- (for AY 1975-76), Rs. 8,000/- (for AY 1976-77), and Rs. 15,760/- (for AY 1977-78) justified and affirmed by the Tribunal. Concerning the Sundry World Bank Account, the Court found that advance payments for booking tractors were often the entire sale consideration, and balances were not always returned. The CIT(A)'s finding, affirmed by the Tribunal, that these amounts were trading receipts and assessable as income, with directions to adjust refunds in the year of deposit, was upheld. The addition on account of the Post Warranty Service Account was deleted by the CIT(A) and not appealed by the revenue. Consequently, all substantial questions of law were answered in favour of the revenue. The appeals were dismissed.

The High Court held that the Tribunal was correct in rejecting the assessee's plea that Section 148 could not be invoked due to a 'change of opinion'. The Court found that the original assessment under Section 143(1) was summary and lacked detailed scrutiny of the interest claim. The subsequent discovery that the assessee was claiming compound interest when only simple interest was admissible constituted a clear case of escapement of income, not a mere change of opinion. The Court also referred to the Supreme Court judgment in Shew Kissen Bhatter, which disallowed compound interest as a deduction, holding that only interest on the principal amount borrowed is deductible, not 'interest on interest'. Therefore, the claim for deduction of compound interest was disallowed, and only simple interest was allowed. Both substantial questions of law were answered in favour of the revenue, and the references were adjudicated against the assessee.

The High Court held that the ITAT and CIT(A) erred in reversing the AO's finding. It was a conceded fact that the gift was not genuine. The Court noted that the partners of the assessee firm did not maintain separate books of accounts. Therefore, any unexplained and ingenuine credit found in the books of the assessee firm, even if appearing in a partner's capital account, was to be accounted for in the firm's books and treated as the firm's income for the year, as per Section 68 of the Income Tax Act, 1961. The Court relied on the judicial mandate in Smt. Shanti Devi v. Commissioner of Income Tax, which held that if a partner maintains no books of accounts and a credit entry appears in the firm's books in the partner's name, the amount should be assessed as the income of the firm. Consequently, the AO's addition was restored, and the question of law was answered in favour of the Revenue. The appeal was allowed.

The High Court held that the Tribunal was wrong in allowing the deduction of Rs. 80,915/- as interest. The Court found that it was an admitted fact that the assessee had paid Rs. 12.25 lacs to M/s Hindustan Brown Boveri Limited for an electric furnace and paid Rs. 80,915/- as interest to the bank on this advance. However, the furnace was neither purchased nor utilized by the assessee for its business; it was purchased and utilized by M/s Seth Hari Chand & Sons Private Limited. The Court applied the test laid down in Deputy Commissioner of Income Tax Versus Core Health Care Limited, requiring borrowed capital to be for the purpose of business and interest to be paid thereon. Since the advance was not for the assessee's business purpose, the disallowance was justified. The Tribunal's findings that the amount was advanced for business purposes and no interest was paid were held to be perverse, being against the facts and the assessee's own admission of claiming the interest deduction. Consequently, the disallowance was upheld, and the Revenue's appeal was allowed.

The High Court of Punjab & Haryana dismissed the writ petition as withdrawn. The court granted liberty to the petitioner to approach the High Court again after the decision of the appeals by the Income Tax Appellate Tribunal, in case the petitioner's grievance subsisted after the Tribunal's decision. The court noted that the appeals pending before the ITAT related to the same assessment years (2003-04 to 2009-10) and that the petitioner had paid the entire tax. The court also dismissed an accompanying application (CM No.18039 of 2013) as not pressed. The primary issue of the revocation of exemption under Section 10(23C)(vi) was not decided on merits by the High Court.

The High Court held that no question, much less a substantial question of law, arose for adjudication. It was undisputed that M/s Bhogal Sons (Regd.) and M/s Bhogal Exports were two separate concerns, with Mr. S.S. Bhogal being a partner in the former and a member of the HUF running the latter. Mr. S.S. Bhogal undertook an export sales promotion trip. The Assessing Officer disallowed the expense for M/s Bhogal Sons (Regd.) because it was not an exporter. The ITAT reversed this, holding that the revenue cannot dictate the mode of business conduct, especially when the expense does not violate any provision of the Income Tax Act. The Court noted that neither the Assessing Officer nor the CIT(A) referred to any law prohibiting M/s Bhogal Sons (Regd.) from claiming such an expense. The Court agreed with the ITAT that increased export orders would benefit M/s Bhogal Sons (Regd.) by enabling increased production and income. Therefore, the ITAT rightly held that the expenses for the foreign trip, admittedly for export sales promotion, could be debited to M/s Bhogal Sons (Regd.). The appeal was dismissed.

The High Court held that the findings of the Assessing Officer, CIT(Appeals), and the Tribunal were findings of fact. The assessee's counsel failed to demonstrate the existence of M/s Manoj Trading Co. under the Haryana Value Added Tax Act, 2003, and was unable to provide the firm's Permanent Account Number. The Court found no substantial question of law arising from the case. Therefore, the appeal was dismissed. The reasoning was based on the concurrent findings of the lower authorities that the firm M/s Manoj Trading Co. did not exist, the transactions were not supported by adequate evidence such as proof of physical delivery of goods or godown locations, and the overall conduct of the assessee in failing to provide crucial information made the claim of loss unbelievable. The ratio decidendi is that concurrent findings of fact by tax authorities, when not shown to be erroneous or perverse, are binding on the High Court in an appeal under Section 260A of the Income Tax Act, 1961, and do not raise a substantial question of law.

The High Court held that the income tax authorities at Delhi were not strangers to the assessee, as she maintained a residence and a bank account in Delhi where the dubious transactions occurred. The authorities at Delhi were legally competent to issue notices under Section 148 (in compliance with Section 147) and Section 142(1) of the Act, especially since the assessee had not accounted for the transactions in question. The court noted that the transfer of the case to Rohtak occurred at the assessee's request after the initial notices were issued from Delhi. The court distinguished the cited precedents, finding the facts of the present case to be different. Regarding judicial consistency, the court stated that while it is aspired for, an inconsistent order does not automatically invalidate a subsequent verdict. The court found no factual or legal error in the Tribunal's order. Consequently, the Tribunal's order was upheld, and all five appeals were dismissed as lacking merit.

The High Court, after hearing both counsel and perusing the questions of law, decided to dispose of the present references in terms of its previous orders dated 24.08.2004 and 23.09.2004. These prior orders had already answered similar questions of law and remitted the matters to the Income Tax Appellate Tribunal. The Court found no reason to deviate from this established course of action. Therefore, the present references were disposed of in line with the precedent set by the Court in ITA No. 69 of 2003 and ITR No. 5 of 1996. The operative direction is to follow the same course as in the cited cases, implying a remittance to the ITAT after answering the questions of law.

The High Court found that the ITAT had indeed failed to deal with the revenue's argument that the CIT(A) was not justified in setting aside the order passed under Section 154 of the Act. The Court held that the ITAT's order suffered from an error of jurisdiction on this point. Regarding the second issue, the Court noted that the CIT(A) and ITAT had apparently ignored Section 153(1)(a) and the Supreme Court judgment in Assistant Commissioner of Income-tax v. J.K.Synthetics Ltd., which are significant to the controversy of whether additional income can be demanded if the addition still discloses a loss. Consequently, the High Court allowed the appeal, set aside the ITAT's order, and remitted the matter back to the ITAT for a fresh decision in accordance with the law.

The High Court held that the proviso to Section 80-J(3) of the Income Tax Act is unambiguous regarding the legislative intent. It clearly states that the deficiency or any part thereof can be carried forward beyond the seventh assessment year as reckoned from the end of the initial assessment year. The Court found no ambiguity in the meaning of the words and expressions used in the proviso. Consequently, the Court found no reason to hold that the order passed by the ITAT, affirming the order of the CIT(A), was contrary to the provisions of the Act or raised any question of law. The reference was answered accordingly. The operative direction was to answer the reference in favor of the assessee, upholding the ITAT's decision. No issue was expressly left undecided.

The High Court, in view of the agreement between the parties, decided to remit the matter to the Commissioner of Income Tax (Appeals), Jalandhar. For question (i), the Commissioner is to decide it afresh in accordance with law, taking into consideration the directions issued by the Hon'ble Supreme Court in Civil Appeal No. 2445 of 2005 (Morinda Cooperative Sugar Mills Ltd. v. Commissioner of Income Tax, Chandigarh). While adjudicating question (i), the Commissioner is also directed to decide the quantum of deduction allowable to the appellant under Section 80-P(2)(a)(iii) of the Income Tax Act, 1961, after considering purchases from members and excluding purchases from non-members. The order passed by the Income Tax Appellate Tribunal stands modified accordingly. The court did not expressly leave any issue undecided, but rather remitted all issues for fresh adjudication based on the agreed procedure.

The High Court held that the ITAT was justified in restoring the addition made by the Assessing Officer. The Court found that the foreign gifts were made by donors who were neither related to the assessee nor was there any specific occasion for such gifts. The amounts were substantial, and neither the donors nor the donees had demonstrated that such large gifts had ever been made or received within their families or from such donors. The Court referred to its own previous judgments, particularly in ITA No. 498 of 2005 (CIT, Karnal vs. Puneet Singh) and ITA No. 392 of 2005 (CIT, Faridabad v. Sh. Kamal Gupta), which held that NRI gifts from strangers are not genuine unless the assessee proves natural love and affection and the donor's financial capacity. The assessee failed to establish any occasion, relationship, natural love and affection, or the donor's means and the genuineness of the gift. Therefore, the ITAT's order was not perverse or improper and was upheld. The appeal was dismissed.

The High Court held that the restriction under Section 80IA(9), which is applicable to Section 80IB(13), is not merely that the total deduction should not exceed profits and gains. There is a further restriction that deduction allowed under Section 80IA or 80IB acts as a bar to claiming deduction under any other provision of the Chapter. The Court referred to its own judgment in CIT vs. Abhishek Industries Limited, which in turn relied on CIT vs. Honda Siel Power Products Ltd. and CIT vs. Max India Ltd. (SC). It was held that if an assessee claimed deduction under Section 80IB, deduction under Section 80HHC is to be granted only after reducing the profit to the extent already allowed under Section 80IB. This principle was further supported by quoting from Rogini Garments, which stated that Section 80HHC is not a self-contained provision and is subject to the restrictive clause in Section 80IA(9). The Court found that the AO's order was indeed erroneous and prejudicial to the interest of the revenue. Consequently, the orders of the CIT and ITAT were affirmed, and the AO was directed to recompute the total income accordingly. All questions posed by the appellant were decided in favour of the revenue.

The High Court held that no substantial question of law arose for adjudication. The Court reasoned that while an AO may legitimately call upon an assessee to explain a suspicious entry in its books, the assessee cannot be compelled to disclose the source from which the person depositing money with the firm obtained their funds, once the source of the entry in the assessee's books is disclosed. In this case, the partners had deposited amounts with the firm. The AO had added the amount to the firm's income because the firm had not disclosed the source of funds in the hands of its partners. The Court found this approach to be inherently flawed. The Tribunal had rightly set aside the AO's order, noting that the partners had offered the amounts for assessment in their individual cases, and the addition could not be made in the hands of the firm as a cash credit. The appeal was consequently dismissed.

The High Court held that as a mere show cause notice had been served after recording a prima-facie opinion that the assessment for the year 1991-92 required re-consideration, the petitioner should have, in the first instance, raised her pleas regarding lack of jurisdiction, insufficiency of reasons under Section 147, and other related matters before the Assessing Officer, rather than approaching the High Court. The Court noted that the Income Tax Act provides a complete procedure for appeals, rectification, and revision, and a writ petition under Article 226 is generally reserved for exceptional circumstances. The adjudication of the show cause notice would necessarily involve disputed questions of fact concerning transactions, income declarations, and properties, which can only be scrutinized by the Assessing Officer after considering the petitioner's objections. Therefore, the writ petitions were dismissed, relegating the petitioner to seek adjudication of the show cause notice. The Assessing Officer was directed to consider all objections raised or to be raised by the assessee in response to the show cause notice, as well as objections relating to the order passed under Section 147. Parties were directed to appear before the Assessing Officer on 31.1.2014.

The High Court of Punjab and Haryana, in its judgment dated 18.11.2013, answered the reference in favor of the assessee. The Court noted that the counsel for the revenue conceded that the question of law had already been decided against the revenue in the case of Commissioner of Income Tax v. Karanbir Singh, [2008] 303 ITR 231 (P&H). Therefore, following this precedent, the reference was answered in terms of the aforesaid judgment. The ratio decidendi is that enhanced compensation and interest thereon, when received and utilized at the assessee's discretion, are not taxable, as established by the earlier High Court ruling. The operative direction was to answer the reference in line with the cited precedent.

The High Court held that the ITAT was correct in declining to restore the Miscellaneous Application for rectification. The Court observed that it is an established principle of law that when an appeal is pending before a superior forum, an application for rectification (which the Court characterized as akin to a review in this context) cannot be entertained by a subordinate forum. The ITAT is considered subordinate to the High Court under the Income Tax Act, 1961, and Article 227 of the Constitution. Since an appeal on the same questions raised in the rectification application was pending before the High Court, the rectification application was not maintainable before the ITAT. Therefore, the order passed by the ITAT declining to restore the application did not warrant interference. The High Court did not decide on the merits of the rectification sought, as the application was deemed not maintainable.

The High Court held that the expenditure incurred by the assessee in excavating the drain is capital in nature. The Court concurred with the reasoning that complying with statutory requirements, such as discharging effluents within permissible limits, confers a benefit of an enduring nature. Referencing the case of CIT v. Glen View Rubber Co. (P) Ltd., the Court stated that expenditure on installing a permanent asset that provides benefit from year to year is capital expenditure. The fact that the assessee does not own the land is irrelevant, as the drain facilitates compliance with environmental laws, providing a lasting advantage. The Court answered this question in favour of the revenue. Regarding the second issue, the Court upheld the Tribunal's finding that the loss incurred by the assessee due to the inability to obtain TDS certificates was allowable as revenue expenditure, as it arose in the course of business, citing the Supreme Court's decision in Sutlej Cotton Mills Limited v. CIT. The Court found no reason to differ with the Tribunal's opinion on this point.

The High Court addressed the issues as follows: Regarding questions (I) and (II), the Court noted that the parties agreed the issues were referred back to the Assessing Authority by the Tribunal and did not require determination by the High Court. For question (III), the Court held that interest under Sections 234B and 234C is chargeable while computing income under Section 115JB, relying on its own judgment in M/s Amtek Auto Limited v. The Commissioner of Income Tax, Gurgaon, ITA No.589 of 2006 (decided on 25.3.2011) and a Division Bench judgment in Commissioner of Income Tax v. Nahar Spinning Mills Limited, (2011) 339 ITR 557. Thus, this question was answered against the assessee. For question (IV), the Court held that interest under Section 234D is chargeable for assessment years prior to its introduction if the regular assessment is completed after 1.6.2003, for the period commencing from 1.6.2003 till the date of regular assessment. This was based on judgments in CIT, Faridabad v. M/s NHPC Limited, ITA No.324 of 2009 (decided on 24.9.2013) and other cited cases. Therefore, question (IV) was answered in favour of the revenue. The appeal was allowed in the manner indicated.

The High Court held that the appeal preferred by the revenue had no merit and dismissed it. The Court found that the ITAT and CIT(A) had rightly decided the issue in favour of the assessee. The reasoning was based on Circular No. 100 dated 24.1.1973, which clarifies that repayment of a loan taken for trust objects amounts to application of income for charitable purposes. Applying the same analogy, expenditure incurred in earlier years and repaid out of current year's income would also be covered. The Court respectfully agreed with the Rajasthan High Court in CIT v. Maharana of Mewar Charitable Foundation and the Gujarat High Court in CIT v. Shri Plot Swetamber Murti Pujak Jain Mandal, holding that the adjustment of expenses incurred in an earlier year against the income of a subsequent year amounts to applying the income for charitable purposes in the subsequent year, thus qualifying for exclusion under Section 11(1)(a). The judgments cited by the revenue were distinguished as not applicable to the present facts. The substantial question of law was answered against the revenue and in favour of the assessee.

The High Court of Punjab and Haryana, while hearing ITR No. 71 of 1998, has decided the referred question of law against the revenue. The Court found that the issue had already been decided in favour of the revenue in a previous case, ITR No. 287 of 1995, titled "Commissioner of Income tax, (Central), Ludhiana Versus M/s Bhagyoday Investment Pvt. Ltd., Ludhiana", decided on 21.05.2008. Consequently, the High Court answered the question of law in terms consistent with the ruling in the aforementioned judgment. The operative direction is that the reference is disposed of accordingly, implying the ITAT's order treating the assessee as an industrial company and applying the lower tax rate is upheld. No issue was expressly left undecided.

The High Court held that no substantial question of law arose from the ITAT's order and dismissed the appeals. The Court found no merit in the appeals, agreeing with the Tribunal's reasoning. The Tribunal had observed that the assessee purchased unquoted shares of M/s Arcee Ispat Udyog Limited on 8.11.2007 at ₹100/- per share and sold them on 1.2.2008 at ₹10/- per share, incurring a loss of ₹22,50,000/-. The Tribunal noted that the assessee could not explain the high purchase price or the subsequent drastic decline in value to face value. The Tribunal considered the transactions to be circular, with the shares being sold back to a director's wife by the broker. It also noted that the book value of the shares as of 31.3.2008 was ₹56/-, yet they were sold at ₹10/-. The Tribunal concluded that these transactions were not for a commercial purpose but were designed to create an artificial loss to reduce tax liability, citing McDowell and Co. Limited v. CTO. The offer of surrender by the assessee was also considered as supporting evidence for the AO's findings. The High Court distinguished the assessee's reliance on Porrits and Spencer (Asia) Limited by noting the factual differences and the Apex Court's judgment in Union of India v. Azadi Bachao Andolan.

The High Court held that the Revenue had failed to refer to any provision that impedes an assessee's right to claim depreciation when income is assessed by applying a net profit rate. The Court acknowledged that a statutory impediment was introduced by an amendment to Section 44AD(2) of the Income Tax Act, 1961, effective from 1.4.1994. However, since the assessment year in dispute was 1989-90, this amendment was not applicable. Therefore, for the assessment year in question, there was no impediment to the assessee claiming depreciation even if income was calculated on a net profit of 8%. The Court found no error of jurisdiction or law in the ITAT's order. The substantial question of law was answered against the Revenue.

The High Court allowed the writ petition to be dismissed as withdrawn based on the statement made by the petitioner's counsel. The reasoning was that the petitioner intended to file an application before the ITAT concerning their pending appeal. The High Court directed that if the petitioner files such an application and seeks interim relief, the ITAT shall consider it and pass appropriate orders. No specific finding was made on the merits of the original dispute or the order passed by the CIT(A). The operative direction was the dismissal of the writ petition as withdrawn.

The High Court held that an assessment completed without impleading all the legal representatives of a deceased assessee, especially when the Assessing Officer is aware of this fact, is a nullity. The court rejected the revenue's argument that the presence of one legal heir, Narinder Kumar, constituted acquiescence by all legal heirs. It was noted that Roshan Lal's estate was inherited by five legal representatives, and Narinder Kumar's presence did not imply representation of the entire estate with the consent of others. Therefore, the assessment order passed without impleading all legal representatives is null and void, requiring the Assessing Officer to proceed afresh after impleading them. The question of law was answered in favor of the assessee.

The High Court held that the question of law referred by the Tribunal was no longer res integra, meaning it had already been decided. The Court referred to its own Division Bench judgment in Commissioner of Income-Tax Versus Jaideep Industries (1989) ITR 81. In that case, the Court had held that the requirement of filing the audit report along with the return of income in terms of Section 80J(6A) is mandatory. The provision clearly states that the deduction shall not be admissible unless the assessee furnishes the audit report in the prescribed form, duly signed and verified by an accountant, along with the return. Therefore, the Court answered the question in the negative, in favour of the Revenue and against the assessee. The reference was disposed of in terms of the answer recorded in the cited judgment.

The High Court, in this reference, decided the substantial question of law based on the agreement of the parties. The Court held that the question of law is answered in terms of the judgment in ITA No.15 of 2012 (Commissioner of Income Tax-II, Chandigarh v. M/s SAB Industries, Chandigarh), decided on 22.10.2013. The ratio decidendi is that where a similar substantial question of law has been decided by the High Court in favour of the assessee, and the parties in the present reference agree to follow that precedent, the present reference will be disposed of accordingly. The operative direction is to answer the question of law in line with the cited judgment, implying the ITAT's decision that no interest under Section 215 is chargeable is upheld.

The High Court held that the Assessing Officer (AO) acted on a presumption that the books of accounts had suppressed sales, while the stock statement furnished to the bank was correct. This conclusion was not based on any verification of the bank's stock statement to question the genuineness of the books of accounts. Furthermore, the AO had not rejected the books of accounts nor resorted to Section 145 of the Act. The Court noted that books of accounts prepared in the regular course of business carry a presumption of truth, whereas a stock statement furnished to a bank for credit facilities does not. For the AO to doubt the books of accounts, a reference to the bank's report on the physical verification of the hypothecated stock was necessary. In the absence of such a report, giving undue weight to the stock statement over the books of accounts was incorrect. Therefore, the Tribunal was right in affirming the CIT(A)'s order deleting the addition.

Regarding the first question concerning the applicability of Section 80-I(6) and 80-I(8), the High Court held that the Tribunal was not justified in making a reference relating to the reallocation of income under Section 80-I(6). This was based on the fact that the Revenue had already accepted the correctness of the ITAT's order for assessment year 1988-89, which had decided against reallocation of income under Section 80-I(6). Furthermore, the Revenue did not specifically seek a reference invoking Section 80-I(6) in the appeal for assessment year 1989-90. The Tribunal's earlier order (para 32 & 33) had clarified that Section 80-I(6) was enacted to ascertain profits as if the industrial undertaking were an independent unit and did not grant revenue authorities the power to reallocate expenses, especially when the assessee maintained regular books of account and production records. For the second question, the High Court stated that it had already been answered/decided by the same Bench in ITR No.124 of 1997 on 29.10.2013, in the case of Commissioner of Income Tax (Central) Ludhiana Versus M/s Nahar International Limited, Ludhiana, and was therefore answered accordingly. The operative direction was that the reference is disposed of.

The High Court allowed the writ petition. It held that the impugned order dated July 5, 2013, was factually incorrect, as it was admitted by the counsel for the revenue that the petitioner had filed a return on July 13, 2006. Consequently, the Court set aside the impugned order and remitted the matter back to the Assessing Officer. The Assessing Officer was directed to decide the petitioner's objections afresh and in accordance with the law. The Court did not explicitly decide whether the reasons for re-assessment were valid, as the matter was remitted for fresh consideration of objections.

The High Court held that the question of law referred by the ITAT was whether the Tribunal had correctly held that no interest under Section 215 is chargeable. The revenue's argument was not that the Tribunal lacked the power to waive interest under Section 215 read with Rule 40(5), but rather that the discretion exercised by the Tribunal was flawed. The Court noted that Section 215(4) empowers the Assessing Officer to reduce or waive interest in prescribed circumstances, and Rule 40(5) allows waiver in any case where the Deputy Commissioner considers it justified. The Court emphasized that this power, though broad, must be exercised with judicial discretion, involving a bonafide appraisal of facts and a perceptible process of reasoning. Upon reviewing the ITAT's order, the Court found that the Tribunal's decision to waive interest was based on a considered appraisal of facts, including the assessee's bonafide belief regarding certain deductions claimed, and the pendency of related matters before the High Court. The Tribunal's reasoning that a disallowed claim does not automatically imply mala fide intent or a wrong estimate was found to be sound. Therefore, the discretion exercised by the Tribunal was neither arbitrary nor perverse. The question of law was answered in favor of the assessee.

The High Court held that it was unable to discern any substantial question of law from the five questions referred. The Court found that the questions framed by the Revenue pertained to additions that were deleted by the ITAT by referring to facts. The questions did not refer to any legal principle or provision of law that would require an answer. The Court expressed surprise at the casual manner in which these five 'so-called questions of law' were presented, characterizing them as nothing more than questions of fact. Consequently, the High Court declined to answer these questions of fact. No specific operative directions were issued as the reference was declined.

The High Court held that there was no merit in the revenue's appeal. The Court analyzed Section 221(1) of the Act, which states that an assessee in default in making a payment of 'tax' is liable for penalty. The definition of 'tax' in Section 2(43) of the Act means income-tax chargeable under the Act and does not include penalty or interest. Therefore, a default in payment of interest alone does not attract penalty under Section 221(1). The Court distinguished the revenue's cited case of E.K. Varghese, which dealt with advance tax (considered 'tax'), from the present case concerning interest. The judgments of the Calcutta High Court in Shreeniwas & Sons and the Bombay High Court in P.B. Hathiramani were relied upon, confirming that interest is not 'additional tax' and penalty under Section 221(1) is leviable only for default in payment of 'tax' as defined. Consequently, the ITAT's deletion of the penalty was upheld. The substantial questions of law were answered accordingly, and the appeal was dismissed. No issue was expressly left undecided.

The High Court decided the reference in terms of its earlier order dated July 2, 2010, passed in ITR No.410 of 1995, which had answered the question regarding Section 80-I(8) against the revenue. Therefore, the present reference was also answered against the revenue on this point. Regarding Section 80-I(6), the Court noted that the revenue had not presented any arguments on this provision before the Tribunal while deciding the quantum appeal. Consequently, the Court found no reason to answer the part of the question relating to Section 80-I(6). The appeals and references were disposed of accordingly. No specific amount in dispute was recorded.

The High Court held that the ITAT's order was not legally flawed. The Court noted that the assessee had provided detailed written explanations for the diary entries, which pertained to the period 9th May 1987 to 31st March 1988, concerning purchases and sales of empty bags, seeds, grease, and diesel. The ITAT found that the Revenue had not disputed or controverted these explanations. Consequently, the ITAT rightly deleted additions related to explained entries while making an addition of Rs. 26,000/- for unexplained investment in business, thereby granting relief of Rs. 1,96,107/-. The Court found that the ITAT's decision was based on a factual appraisal of the diary, the assessee's explanation, and pure findings of fact, which did not give rise to a substantial question of law. The appeal was dismissed.

The High Court held that no question of law, much less a substantial question of law, arises for consideration. The Court found that the ITAT, after considering that a cheque was issued in favor of the assessee from the proprietorship concern's account, which was then deposited into the newly formed company's account and returned to the assessee, concluded that the amount belonged to the assessee as capital from the proprietorship concern. The ITAT also upheld the CIT(A)'s decision to restrict the addition to Rs. 34,858, the extent of accumulated profits. The Court was not inclined to take a different view from the Tribunal, stating that the revenue's arguments raised disputed questions of fact that were answered in favor of the assessee. Since there was no error in considering the facts or applying any provision of the Act, the Court found no reason to hold that the findings of fact by the ITAT and CIT(A) gave rise to a question of law. The appeal was dismissed.

The High Court held that there was no merit in the Revenue's appeal. The primary question was whether there was commercial expediency in giving interest-free loans by the assessee to HMGB. The Court referred to the findings of the CIT(A) and the Tribunal, which concluded that HMGB manufactured Penicillin G, a critical raw material for the assessee, and purchases from HMGB constituted a significant portion of the assessee's total and domestic purchases. This ensured the assessee's own business and production schedule. The CIT(A) also noted that the assessee earned interest on advances to HMGB at a higher rate (16.50%) than its borrowing cost (2-3%). The Court found that the CIT(A) and Tribunal had correctly concluded that there was commercial expediency and the deduction was admissible under Section 36(1)(iii) of the Act, citing the Supreme Court's judgment in S.A. Builders Limited. The Court found the Revenue's reliance on Abhishek Industries Limited, Motor General Finance Limited, and Indian Shavings Products Limited to be unavailing due to distinguishable facts or being prior to the S.A. Builders judgment. The substantial questions of law were answered against the Revenue.

The High Court held that the ITAT was justified in setting aside the penalty. The Tribunal found that the assessee had disclosed the assets and the interest income accruing on fixed deposit receipts in its books of accounts. The assessee's explanation that they were advised to directly credit the interest in the partners' names, which was later found to be legally impermissible, was considered logical by the Tribunal. Therefore, the Tribunal concluded that this did not attract penalty under Section 271(1)(c) for furnishing incorrect particulars or concealment of income. The High Court, referencing the Supreme Court's decision in CIT vs. Reliance Petro Products Pvt. Ltd., reiterated that penalty is not attracted for every infraction or denial of a claim, but only where inaccurate particulars are furnished with mens rea to evade tax. The Court found the Tribunal's discretion to be neither arbitrary nor perverse and dismissed the appeal.

The High Court held that the appeals had no merit. The Court analyzed Section 145 of the Income Tax Act, noting that prior to the amendment by the Finance Act, 1995, assessees could follow cash, mercantile, or a mixed/hybrid system. However, the amendment, effective from April 1, 1997, mandated computation of income only in accordance with either the cash or mercantile system. The assessee in this case followed the mercantile system of accountancy. Under this system, income accruing, even if not received, is subject to tax. The Tribunal's findings, upheld by the CIT(A) and Assessing Officer, were that the assessee had not proven the recovery of interest was doubtful. Specific instances, such as loans to Bhuna Co-op. Sugar Mills and Panipat Cooperative Sugar Mill, showed that loans and interest were received back in some cases, contradicting the claim of doubtful recovery. The Court found no documents to support the claim of doubtful recovery. The judgments relied upon by the assessee (UCO Bank, Punjab Financial Corporation, and Godhra Electricity Co. Ltd.) were either prior to the amendment of Section 145 or decided on their own specific facts not applicable here. Therefore, the substantial question of law was answered against the assessee. The appeals were dismissed.

The High Court held that no question of law, let alone a substantial question of law, arose for adjudication. It was undisputed that the appellant received Rs. 16,40,160/- as enhanced compensation and interest in the previous year relevant to 1991-92. This amount was placed in an account under the Capital Gains Scheme, 1988, postponing taxability for two years, during which Section 54-B of the Act required the purchase of agricultural land. As the appellant admittedly failed to purchase agricultural land within the prescribed period, the AO was correct in imposing capital gains tax. The orders of the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal, which affirmed the AO's action, were also found to be free from error of jurisdiction or law. The High Court found no error in the imposition of tax on capital gains.

The Tribunal held that the penalty is not legally sustainable. It reiterated the legal principle that penalty does not automatically follow the rejection of a claim. A penalty is penal in nature and requires proof of inaccurate particulars and mens rea. The absence of a finding of inaccurate particulars or guilt based on relevant facts vitiates a penalty order. The Tribunal referred to the Supreme Court judgment in Commissioner of Income Tax v. Reliance Petroproducts Pvt. Ltd. ([2010] 322 ITR 158 (SC)), which held that making an incorrect claim in law does not amount to furnishing inaccurate particulars and that mens rea is necessary for penalty under Section 271(1)(c), as 'inaccurate' signifies a deliberate act or omission. The assessee had disclosed the compensation receipt in assessment year 1991-92, and the Assessing Officer was aware of this. The mere fact that the amount was not shown in the return for assessment year 1993-94 or was subsequently disallowed would not infer mens rea to conceal income sufficient to invite penalty. The question of law was answered in favour of the assessee.

The High Court found no merit in the appeal. Following the Supreme Court's decision in Sargam Cinema v. CIT, it was held that the Assessing Authority cannot refer a matter to the DVO without rejecting the assessee's books of account. The Tribunal had recorded a categorical finding that the books were never rejected, making the reliance on the DVO's report misconceived. The High Court also referred to its own decision in CIT v. Chohan Resorts, which held that a reference under Section 142A is not justified without rejecting the valuation shown in the books. Therefore, the difference in valuation claimed by the revenue, amounting to ₹2,35,933, could not be treated as unexplained investment. The judgment of the Uttarakhand High Court in Bhawani Shankar Vyas's case was considered to be prior to Sargam Cinema and contrary to the law laid down by the High Court. The appeal was dismissed, answering the substantial questions of law in favour of the assessee.

The High Court held against the assessee on both substantial questions of law. Regarding the first issue, the Court noted that Section 43(5)(d) of the Act was introduced by the Finance Act, 2005, with effect from April 1, 2006, and thus was not applicable to the assessment year 2004-05. Consequently, the claim for setting off short-term capital loss was rightly declined. Concerning the second issue, the Court analyzed the definition of 'month' as per Section 3(35) of the General Clauses Act, 1897, and the interpretation from Halsbury's Laws of England and the Supreme Court's decision in M/s Himachal Techno Engineers. The Court concluded that a period of three months reckoned from December 26, 2003, would expire on March 26, 2004. Therefore, the sale on March 26, 2004, fell within the ambit of Section 94(7)(b) of the Act, and the authorities were correct in disallowing the claim for short-term capital loss. The judgment in M/s Himachal Techno Engineers was found not to assist the assessee. The substantial questions of law were answered against the assessee.

The High Court held that the Tribunal was right in dismissing the miscellaneous application filed by the Revenue under Section 254(2) of the Act. This decision was based on the Court's order of even date in a connected appeal (ITA No. 251 of 2005) concerning assessment year 2003-04, which had held that a reference under Section 142A of the Act to the Departmental Valuation Officer was unjustified. Consequently, the substantial question of law framed by the Revenue was answered against the Revenue and in favour of the assessee. The appeal filed by the Revenue was dismissed. The ratio decidendi is that the retrospective applicability of Section 142A, as introduced by the Finance (No.2) Act 2004, would not override the existing legal position regarding the justification of references to the Departmental Valuation Officer, especially when the assessment was not final and the Tribunal had already passed an order on the merits of the case.

The High Court held that no substantial question of law arises for adjudication. The Court found no reason to interfere with the ITAT's order. The Revenue's argument that the assessee was not entitled to claim the set-off was summarily rejected. The Court noted that in the initial round of litigation, the ITAT had allowed the assessee to raise an additional ground and held that a unit entitled to deduction under Section 10-B could set off its loss against profits of another unit, remitting the matter for fresh consideration. The Revenue had accepted this order by not filing an appeal. The subsequent denial of relief by the Assessing Officer and CIT(A) was considered without jurisdiction, as they could not disallow relief after the ITAT had directed fresh consideration on an admitted additional ground. The ITAT had correctly reversed these orders. The Court found that on the relevant date, the Act did not prescribe any impediment to such set-off, and the Revenue failed to refer to any statutory provision or precedent to the contrary. Therefore, the ITAT's order granting relief was in accordance with law. The appeal was dismissed.

The High Court held that there was no merit in the appeal. The Assessing Officer, Commissioner of Income Tax (Appeals), and the Tribunal had concurrently found that there was no commercial expediency in advancing the interest-free loan to the sister concern. The AO noted that the assessee was a profit-making concern while the sister concern was loss-making, suggesting the advance was a device to transfer profits and reduce the tax liability of the assessee. The High Court agreed with the lower authorities that the commercial expediency must be seen from the perspective of the loan giver. The reliance on Malayalam Plantation Limited and S.A. Builders Limited did not help the assessee as the concurrent finding of no commercial expediency was established. The substantial question of law was answered against the assessee. The appeal was dismissed.

The High Court held that there was no illegality or infirmity in the Tribunal's findings. When account books are rejected in their entirety, they are ruled out of consideration and cannot be relied upon by either the assessee or the revenue. Consequently, entries within rejected books, whether suspicious or not, cannot form the basis for making additions to income. The Assessing Officer rejected the assessee's account books and then proceeded to assess income by applying a flat rate of profit. Subsequently, the AO added Rs.1,98,298/- based on certain 'entries' deemed suspicious. Both the CIT(A) and the Tribunal rightly held that since the books of account were rejected in their entirety, the AO could not rely on any entry therein for making this addition. The Court also noted that a bare reading of Section 68 of the Act indicates it would not apply to a situation where account books have not been rejected. The questions of law were answered against the revenue and in favour of the assessee. The appeal was dismissed.

The High Court held that the first substantial question of law was covered against the Revenue by its previous judgment in ITA No.148 of 2007 (Commissioner of Income Tax Chandigarh-II V/s M/s SAB Industries Limited). Regarding the second question concerning interest under Section 234B, the Court noted that the assessee claimed deduction under Section 80-IA in November 2006, and this exemption was nullified by a retrospective amendment in the Finance Act, 2007. The Court agreed with the CIT(A) and ITAT that the assessee could not have foreseen this retrospective amendment and therefore acted under a bonafide belief. Citing the principle 'Lex non co git ad impossibilla' (Law cannot compel you to do the impossible) and the judgment in "The Commissioner of Income Tax, Panchkula V/s M/s Haryana Warehousing Corporation, Panchkula", the Court held that the assessee was not liable to pay interest under Section 234B as they were not liable to pay advance tax at the relevant time due to a bonafide belief. The discretion exercised by the lower authorities was found to be neither perverse nor arbitrary. The Court answered the second question of law against the Revenue. No issue was expressly left undecided.